Latest Release Dated 06/29/06 (10:00 GMT)
EUR/USD More Losses Likely for Euro, but Watch out for FOMC
GBP/USD Ratio Still Net Long, Signaling that Weakness is Dominant
USD/CHF Lack of Confirmation from USD/CHF Caps Potential Losses in Euro
USD/JPY 300 Pips in 3 Weeks, Still Looking for More Gains
The ratio of longs to shorts in the EUR/USD is 1.18, which is within the extreme +/- 3 range. Last week we had said that at 8:30am EST, the ratio had flipped from net short to net long. Since then the ratio has continued to flip flop, which has been indicative of the broad range trading mode of the currency pair. However on a week to week basis, the ratio has remained net long, shielding traders monitoring the ratio only a weekly basis from false signals. The net long nature of the ratio has coincided with another 75 point sell-off in the currency pair hitting our target of 1.25. Currently, the USD/CHF ratio is still not confirming the EUR/USD ratio which means that losses could remain limited. However, with such a pivotal event later today (FOMC) meeting, it would not be surprising to see a more significant shift in overall positioning. Over the past week, total positions in the EUR/USD has fallen by 7.7 percent on a 24 percent slide in short positions and 12.9 percent rise in long positions.
The ratio of longs to shorts in the GBP/USD is 1.43, which is within the extreme +/- 3 range. Like in the EUR/USD, the GBP/USD ratio flipped from net short to net long at 8:30am EST last Thursday. Since then, it has also flipped back and forth, but on a weekly basis, it has remained net long. This has coincided with another 125 pip sell-off in the currency pair. Positioning in the GBP/USD has increased as traders try to find bargains after the recent slide. Total positioning is up by 14 percent thanks to a 44 percent rise in longs and a 12 percent slide in shorts. For the time being, the ratio is still signifying more losses for the GBP/USD but once again, the dollar risk remains high post FOMC, so it may be likely that positions will flip again (we will update it in todays daily fundamental report).
The ratio of longs to shorts in USD/CHF is 1.18, which is within the extreme +/- 3 range. The ratio has remained net long all week, correctly signaling to us that any losses in the EUR/USD will be limited. We are still getting the same signal at the moment even though both the EUR/USD and USD/CHF ratios are close to parity. Total positioning in the currency pair has fallen by 8.8 percent driven primarily by bears pulling back. Short positions are down by 17.6 percent while long positions remained unchanged.
As of 5am EST, the ratio of longs to shorts in USD/JPY was -1.72, which is within the extreme +/- 3 range. The ratio has remained net short for three weeks now and continues to stay very net short. Since having flipped, the currency has rallied over 300 points. As far as we stand now, more gains are expected in USD/JPY. Total positioning has only fallen modestly by 2.7 percent as some bulls take profit ahead of the FOMC meeting. Long positions are down by 16 percent while short positions rose by 7 percent.
